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The International Monetary Fund has recommended increased regulation of cryptocurrency trading, citing the widespread use of digital assets in countries deemed corrupt or under severe financial restrictions.
Cryptocurrency, among other things, allows citizens to undermine the power of government by circumventing trading restrictions set by the government.
Also, it encourages illicit activities by helping criminals avoid investigation. By eliminating intermediaries, cryptocurrency has the ability to wreak havoc on and undermine existing financial infrastructure.
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Fight crypto corruption
IMF analysis shows why countries may choose to require intermediaries, such as digital currency exchanges, to undertake know-your-customer (KYC) processes – identity verification rules intended to combat fraud , money laundering and terrorist financing.
Some countries, such as the United States, have already implemented similar measures.
With the global cryptocurrency industry expected to exceed $4 trillion by 2026, many countries are moving quickly to regulate it.
With the rise of Bitcoin and Ether creating a frenzy among investors, new schemes are being developed to perpetrate various forms of corruption and Ponzi schemes.
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Crypto total market cap at $1.948 trillion on the weekend chart | Source: TradingView.com
Move Dirty Money Digitally
According to the IMF, digital assets could be used to transfer illicit funds or circumvent capital prohibitions. However, the group made no specific mention of any country.
Recent IMF research found that crypto-assets can be used to transfer “the proceeds of corruption or avoid capital controls” in 55 countries.
Participants in the survey, which included between 2,000 and 12,000 respondents from each country, were asked whether they used or owned digital assets in 2020, reflecting recent research in which the organization called for more governance. consistency of digital currency across international borders.
The IMF said it derived its baseline data on bitcoin usage from information collected in a study by Statista of Germany.
Regulate instead of fight
“The best strategy is not to fight but to figure out how to effectively regulate bitcoin,” the IMF research said.
“Residents of countries with a well-developed traditional banking sector may be less likely to feel the need for cryptocurrency,” the researchers conclude.
The authors discovered many reasons why one country’s virtual currency may be more popular than another’s.
Due to high inflation, a popular cryptocurrency such as bitcoin can be more stable than a native currency.
And due to the fact that poorer countries generally have stricter capital controls – measures that restrict the movement of foreign funds to and from the country’s economy – cryptocurrency can also be used to avoid taxes. and restrictions.
The IMF said its findings are noteworthy, but should be interpreted with caution due to the limited sample size and uncertainty about the accuracy of the data.
Featured image from 1stNews, chart from TradingView.com
